European bonds are trading steadily, when expect a collapse?
2022.11.16 09:12
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European bonds are trading steadily, when expect a collapse?
Budrigannews.com – High inflation and aggressive rate hikes by central banks have created difficult conditions for the government bond market, but the exchange facility has held up relatively well, officials said at the European bond conference.
Anthony Linehan, deputy head of finance and debt management at the Irish Treasury, said the debt management sector was sensitive to which parts of the bond market needed support.
“But we have to recognize that most of the transactions are going well,” he said at the European Financial Markets Association (AFME) conference in Brussels.
“In a year of big adjustments, it wasn’t a bad year for bonds,” he added.
Linehan also said flexibility was needed, but the Irish Debt agency said it had received no major complaints from investors about market liquidity.
Officials recently told Reuters that some euro zone countries have relaxed rules for banks to manage public debt transactions and have taken steps to cope with the most difficult market environment in years.
Rodérick Joniaux, European Government Bond product manager at bond trading platform Tradeweb, noted that trading volume has increased in recent months, but added that rising interest rates have not changed the way clients trade.
Irishman Linehan said that the bonus is becoming attractive again.Meanwhile, Maria Cannata, president of the online trading platform MTS, said that bond selling has reached a more “normal” level, with yields on more bonds on the market.
The long-standing stimulus to bond purchases by major central banks, including the European Central Bank, has kept government bond yields at ultra-low levels and curbed volatility.
Rising bond yields this year, driven by high inflation and rising interest rates, pushed the benchmark 10-year German bond yield from -2.06% to -0.18%, according to Refinitiv data, at least in the 1950s.
As for the liquidity of the bond market, Zoeb Sachee, head of euro-linear rates trading at Citi, said that the main cause of the increase in bond market volatility was uncertainty about where the central bank’s terminal rate will be.
“As interest rates approach their peak, bond yields will become more attractive and we will see investor returns in a wide range of locations. Until then, we are still in hectic times,” he said.
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